Families urged to talk before tax changes

• Plan sooner rather than leaving it later

• Help on hand for the best options

• Business structure is important

Communication, compromise and common sense will be crucial in family discussions to safeguard farming businesses ahead of tax changes, say experts.

Michael Horton, of the rural management team for Savills in the East of England, issued a plea for farming families to talk to one another at a recent seminar in Suffolk, held in partnership with law firm Mills and Reeve.

His comments follow the government’s insistence that it will press ahead with plans to impose 20% inheritance tax on farming assets worth more than £1 million. The proposal is to come into effect from April 2026.

Action now

The forum – hosted at the Jockey Club in Newmarket – explored the inheritance tax landscape following last year’s budget, including planned changes to agricultural property relief (APR) and business property relief (BPR.

Mr Horton, who specialises in tax and generational planning, said: “To date, the government is maintaining its position on these changes and it’s important steps are taken now towards planning for future liabilities.

“For the last seven months or so, the telephone has been very busy – and estate and tax planning has been at the top of the agenda.

“We are seeing several clients a week to discuss this very topical issue which is often prompting a wider discussion around how the farming business is structured and how succession plans are implemented.

“There’s a definite need for communication, compromise and common sense as families agree how to structure their future ownership.”

Eligible assets

Currently, APR and BPR offer 100% relief on qualifying assets. But from 6 April 2026 a cap of £1 million will be placed on the combined value of assets eligible for 100% relief – with a huge impact on many farming businesses.

After that date, APR and BPR will apply to qualifying assets at the rate of 50% and the net value will be subject to a 40% tax rate.

This makes tax planning vital for farming families previously unaffected by inheritance tax.

Solicitors Katrina Hopkins and Lauren Parker from Mills and Reeve outlined key considerations for individuals and businesses, including personal allowances and setting up trusts and gifting.

Ms Parker, a partner in the private client team at Mills and Reeve, specialises in advising landed estates.

Based in the firm’s Norwich office, she said it was important not to leave planning too late.

“Conversations need to be had sooner rather than later as there is a window of opportunity to undertake succession planning with the benefit of 100% relief before 6 April 2026.”

Liability

“Family-owned businesses should set aside time to carry out a methodical review to ascertain the potential inheritance tax liability that would arise on the death of a business owner, and the impact this could have on the business’ viability.

“What assets does the business own? Have APR and BPR been maximised? Is it affordable for assets to be transferred to the next generation?  Are there ‘non-core’ assets that could be sold to fund an inheritance tax liability? Should life insurance cover be increased?”

Ms Parker added: “It’s also important to establish any liabilities and assess how much debt the business is carrying as this could be offset against the overall value.”